Barriers to internationalization of SMEs in emerging markets : The impact of cultural constraints on the market entry choice of Swedish SMEs in Russia

Abstract: Internationalization is important for small- and medium-sized enterprises (SMEs) since it is a way to survive and to grow. Emerging markets have enormous latent possibilities for SMEs but behind the possibilities there are potential risks linked to political and institutional factors, uncertain economic and market conditions, and unknown business environments. National culture is one of the factors that create distance between home and host countries. In this paper, the author intends to examine the importance of cultural distance in the internationalization process and the relationship between the international experiences and cultural distance. The author focuses on the internationalization process of Swedish SMEs in Russia. Since culture is a complex phenomenon, the author scrutinizes the nature of cultural distance by employing a qualitative method by in-depth interviewing of managers from two Swedish SMEs. The theoretical framework is important for the analysis and consists of the Uppsala internationalization model and Hofstede’s cultural dimensions. Through the analysis of empirical data and previous research, the author finds that there are significant cultural differences between Russia and Sweden but the role of cultural distance in the internationalization process of the Swedish firms in Russia should not be exaggerated. The author’s conclusions are that cultural distance as a part of psychic distance has influence on the choice of entry mode though its impact is implicit and comes along with other factors. Another finding is that the international experiences of the firms have a great influence on the internationalization process - in the way that cultural distance becomes less important.